Thesis work paper Case 4: PeopleSoft

PeopleSoft started out as a Human Resources (HR) software company and later expanded into accounting software. As the company grew, the HR and accounting functions were expanded to include the manufacturing market.
However problems began when it’s new products fell behind schedule and industry competitors began lowing their prices. By 1999 the firm had lost $178 million, and its software products were receiving bad press due to software bugs and support issues.
At this point, the board hired Craig Conway as the new Chief Executive Officer (CEO) to turnaround the company.
Conway began by introducing spending limits and streamlining the budget and accounting processes. This follows Davidson's (Davidson, 2001) observation that spending disciplines are introduced first in software turnarounds rather than after restructuring and cutbacks.
Next the existing budget process was improved and semi-annual performance reviews were initiated to identify which workers were in the bottom 10% of performers in the firm. This was done to ensure the cutbacks did not remove valuable or productive staff. This same strategy is emphasised by Blumling (Blumling et al., 2002) in that cutbacks must not only be deep, but it is where the cutbacks are made that is equally important. Further it could be argued, that performance management is needed in software and other knowledge based company turnarounds, because identification of a knowledge workers performance is considerably more difficult.
Conway’s team went through each of the firm’s projects, and identified which were behind schedule and which showed the most promise (the exact same advice as given by Sutton (Sutton, 2002)). The market had labelled PeopleSoft’s current software as “legacy” and out of date, as such Conway’s team was looking for a new product that was not only different but would also improve revenue and spread revenue risk.
He went with developers new project, which was to upgrade the existing product to work via a Web browser, and build in more back-office functionality. The development team maintained the web interface was easier to use, easier to program, more customers understood how to use it and no other product on the market had anything similar.
Although seen at the time as a gamble, Conway’s team agreed that doing something different was definitely needed.
This selection of a new and different of product follows the view of Blumling (Blumling et al., 2002) that in software turnarounds firms,
“must invest in new category killers”.
Stepping up both the pace and budget on the new product Conway focused the company only on the product and delivery of PeopleSoft 8. Such a move is stated by Bibeault (Bibeault, 1998) as central to any turnaround. That is, the whole company must all be working towards the same strategic goal.
To ensure that everyone knew that financial position PeopleSoft was in, Conway presented monthly reports to the staff on “where the company at” on the turnaround plan.
He created a sense of urgency about concentrating and focusing on fixing the bottom line. A similar argument is cited by Hays (Hays III, 2003), where he states that turnaround managers must present the turnaround plan and keep the staff updated constantly. This is done so that not only can progress be seen, but to ensure that a sense of urgency is maintained in order to prevent backsliding from occurring.
Company metrics were improved and development was kept on schedule, with updates regularly communicated.
Furthermore Conway changed the company culture from the folksy, short and t-shirts, easy going, free lunches and “bring the dog to work” affair to wearing suits, no free lunches and eviction of non-employees (dogs).
Like Teng (Teng, 2002) Conway explained to staff that there would be “no free lunches” while the firm was losing money, and that the focus must be on turning the company around by developing and rolling out PeopleSoft 8.
By the time the performance review evaluations had finished, cuts were made on slower projects and in the areas of middle management where there was a perceived lack of skill in operations and scaling.
With the release of PeopleSoft 8, not only did revenues return, but also industry analysts estimated that the radical new product had left PeopleSoft's competitors at least one year behind. PeopleSoft returned back to profitability earning $146 Million in 2000.